Really Old Money

By Jyoti Thottam

The year was 1262, and the glorious city-state of Venice was enmeshed in a vicious naval campaign against the emperor of Byzantium and his Genovese allies. The Venetian government needed money, so the Great Council drafted the Ligatio pecuniae. The decree guaranteed 5% interest on money lent to the city-state for its war. The Venetians prevailed and, in the process, established the precursor to the system of borrowing on which every modern government relies. Without it, we wouldn't have deficit financing, Treasury bills or Alan Greenspan.

That is just one of the stories colorfully told and illustrated in The Origins of Value (Oxford), edited by William N. Goetzmann and K. Geert Rouwenhorst. The two economic historians turn what could have been a bone-dry survey of arcane financial instruments into a lively history of finance. Even more improbably, the book is gorgeous. You can see the crimson illumination on the Ligatio pecuniae and read the fine print on a futures contract from the Dutch West India Co. Each chapter is a minihistory written by stars like Niall Ferguson and Robert Shiller, who explain in rich prose the connections between Chinese pawnshops, Greek moneylenders and, ultimately, the cash in your pocket. --By Jyoti Thottam